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Associated Estates Has an Appetite for Apartments
Industry News
Boston Apartment Construction Booms as Rents Rise
Rising Rents Bolster Colorado Springs' Apartments
CMBS Market Stalls in Third Quarter, But Apartments Remain Hot
Almost 1 in 3 Adults Live With Relatives, Study Shows
GoldOller Buys 2,200 Apartment Units for $140 Million
Eruv-Enclosed Communities Appeal to Orthodox Jews
Crescent Expands Multifamily Housing Group
Population Changes Will Impact Housing in Utah
Down Payment Still Biggest Obstacle to Buying a Home
Legislative/Legal News
Salt Lake City Now Requires All Apartment Owners to Get Business License
Apartment Tax Breaks to End in Oregon
Mortgage Default Notices Spike in Q3, RealtyTrac Reports
Recycling Grants to Benefit Columbia (Mo.) Apartments
Fannie Mae Sees Enough Post-2012 Taxpayer Support
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Associated Estates Has an Appetite for Apartments
Digested From "Associated Estates Has an Appetite for Apartments"
Wall Street Journal (10/12/11) by Dawn Wotapka
Associated Estates Realty Corp. has continued to look for new purchases in the apartment sector. This year, the Ohio-based company set out to spend as much as $150 million on apartments. It has already spent $115 million. Among its most recent deals was its $82.5 million acquisition of a 250-unit failed condominium community in the Washington, D.C., metro area. Jeffrey Friedman, longtime CEO of Associated Estates, states, "I don't recall ever being more optimistic about the apartment sector." The buying campaign is part of a larger company strategy to exit such "sleepier" as Michigan in favor of holdings in higher-profile regions like the nation's capital. Friedman adds, "Having too much exposure to any one region could be too risky. We're spreading that risk." Associated is also looking to take advantage of what appears to be a market pause. If the economic recovery regains its momentum and values start rising again, today's aggressive buyers will look smart. To be sure, though, Associated's current $640 million market capitalization is still dwarfed by such industry heavy hitters as Equity Residential, which has a market value near $16 billion. Founded in the 1960s, Associated Estates' portfolio currently includes around 14,000 apartments. Nearly 25 percent of its holdings are in Ohio, while another 20 percent are in Michigan and 5 percent are in Indiana.
Industry News
Boston Apartment Construction Booms as Rents Rise
Digested From "Apartment Construction Booms as Rents Rise"
Boston Globe (10/17/11) by Casey Ross
A wave of new apartment construction is sweeping across Boston’s neighborhoods, as a number of developers have begun work on towering projects to tap into high demand for rental housing. In the past several weeks, a trio of builders have started work on communities that combined will bring more than 850 new apartments to the city over the next two years. This week, a fourth developer is expected to take the wraps off plans to build 295 more apartments on a vacant parcel in Chinatown. Analysts note that the rush of activity is fueled by rising rents and falling vacancy rates that make apartment communities especially attractive investments in the current down market. In the three months ended Sept. 30, Reis Inc. reports that average asking rents in Boston rose to $1,773 a month. This elevated Boston to the fourth most expensive rental apartment market in the nation trailing only New York City; Westchester, N.Y.; and Fairfield County, Conn. Apartment vacancy rates, meanwhile, fell to 4.2 percent from 5.5 percent in the same quarter a year earlier. It's not just downtown Boston that is seeing hot apartment demand. Large new multifamily housing developments are also going up in Andover, Cambridge, Cohasset, Weymouth, and other municipalities. Property professionals expect the increasing supply will eventually bring down monthly rents. Gregory Vasil, chief executive of the Greater Boston Real Estate Board, concludes, "It's been a very long time since we’ve really produced a lot of apartments like this, and the increased supply will help address the problem."
Rising Rents Bolster Colorado Springs' Apartments
Digested From "Rising Rents Lead to Hot Market in Apartment Complexes"
Colorado Springs Gazette (10/12/11) by Andrew Wineke
Apartment Insights reports that Colorado Springs' apartment vacancy rate is currently hovering around the 5.2 percent mark. As such, monthly rents are headed upwards. Researchers note that the average monthly rent for a Colorado Springs-area apartment climbed to $737 in the third quarter, a 4 percent improvement from the same period a year earlier. This trend for residents, but good for investors. Ken Greene of ARA, a brokerage specializing in apartments, observes, "There's pent-up demand. There are many more buyers than sellers." Doug Carter, a local multifamily housing broker with Sperry Van Ness who compiles the Apartment Insights report, said there were no significant apartment sales this past summer. However, demand from both residents and investors will likely remain strong for at least the foreseeable future. Carter concludes, "It's an area of commercial real estate that has financing available. That's what’s attractive about multifamily right now. There are lenders wanting to lend, there are buyers wanting to buy, there are developers wanting to build right now."
CMBS Market Stalls in Third Quarter, But Apartments Remain Hot
Digested From "CMBS Market Stalls in Third Quarter"
Housing Wire (10/14/11) by Liz Enochs
Property analysts at the Appraisal Institute's recent annual fall conference in San Francisco noted that the market for bonds backed by commercial real estate recovered over the past year and a half. However, growth in the third quarter stalled. Ben Thypin, director of market analysis for Real Capital Analytics, is expecting little growth in the issuance of commercial-mortgage-backed securities (CMBS) in the third quarter, and that total volume this year will likely end up around $35 billion. Still, the dollar volume of CMBS deals in just the first six months of this year was more than double what it registered last year, increasing to $25.7 billion from $12.7 billion in all of 2010. All segments of the market have clocked gains over the last year, notes Real Capital Analytics. Senior living properties registered more than a fourfold increase in sales volume in the first half versus a year ago, followed by hotels and apartment communities. Approximately $23.1 billion in apartments in changed hands in the January-through-June period. Thypin notes that apartments exist in a "parallel universe" from other commercial properties due to their access to Fannie Mae and Freddie Mac financing. He adds, "The foreclosure crisis in the single-family market has helped the apartment market."
Almost 1 in 3 Adults Live With Relatives, Study Shows
Digested From "Almost 1 in 3 Adults Live With Relatives"
HousingPredictor (10/12/11) by Mike Colpitts
Of more than 3,000 homeowners and renters polled by Hanley Wood, 30 percent said they were living with relatives -- the highest rate of doubling up since the Great Depression, attributable to the economic and housing market slumps. Although poll-takers said stricter mortgage standards, larger down payment requirements, and economic and employment concerns have hindered home purchases, 87 percent of homeowners and 73 percent of renters believe homeownership is critical to the economy. As many as 2 million potential owners are waiting for the right time to buy, with 29 percent of renters and 19 percent of homeowners planning to purchase a new home during the next couple of years.
GoldOller Buys 2,200 Apartment Units for $140 Million
Digested From "GoldOller Buys 2,200 Apartment Units for $140 Million"
PR Newswire (10/14/11)
Philadelphia-based GoldOller Real Estate Investments LLC last week announced the acquisition of the Timberlake Apartments and the Glades Apartments, both in Orlando. Together, the two apartment communities contain 850 rental units and are part of Gondolier's private open ended apartment fund which GoldOller launched in January 2010. A week earlier, GoldOller closed on eight apartment communities containing 1,395 units. All eight are located in the Kansas City metro area. GoldOller Chairman Richard Oller forecasts that by the end of this year, the GoldOller Apartment Fund will contain more than 5,000 apartments in a half-dozen states. He concludes, "We set our sights on well performing apartment assets in secondary and tertiary markets where pricing still offers a superior rate of return for our investors. All of our properties are highly occupied and well located, and we are exceeding our objectives."
Eruv-Enclosed Communities Appeal to Orthodox Jews
Digested From "Walking the Fine Line of Religious Real Estate"
Inman News (10/11/11) by Stefanos Chen
Orthodox Jews often look for apartments or homes within eruv-enclosed communities, which can be found in New York, Cincinnati, and other U.S. cities. An eruv is a series of wires strung on utility poles and lampposts that can be spotted only by the most observant passers-by, and it creates a symbolic home that allows Orthodox Jews to carry keys and other items and move baby strollers and wheelchairs, among other tasks, during Shabbat -- which lasts from sundown on Friday to Saturday evening. Eruvin have sparked disputes about discrimination against non-Jewish groups and the public display of religious imagery, prompting real estate professionals to avoid the topic unless broached by the client.
Crescent Expands Multifamily Housing Group
Digested From "Crescent Expands Multifamily Group"
Charlotte Business Journal (10/11/11) by Will Boye
Crescent Resources has expanded its multifamily housing division with several new appointees. Denon Williams has been named vice president and regional construction manager, while Susana Granda and Brian Nicholson have been named development managers. Williams most recently served as president of Crosland's contracting company. For her part, Granda has seven years of multifamily development experience with Penrose, Opus West, and Alliance Residential. Other new appointments include Elam Hall, who was promoted to senior development associate; Will Chapman as senior finance associate; and Lori Thornton, who has been elevated to project controller. Brian Natwick, president of multifamily for Crescent Resources, comments, "With this team, we are poised to take advantage of all the opportunities before us."
Population Changes Will Impact Housing in Utah
Digested From "Population Changes Will Impact Housing"
KSL NewsRadio 1160 (Utah) (10/10/11) by Jasen Lee
Analysts report that Utah's increasingly diversified population is creating some challenges for those searching for affordable housing options. That trend along with the current economic conditions is changing the housing landscape throughout the state. Pam Perlich, senior research economist for the Bureau of Economic and Business Research at the University of Utah, observes, "People have less capacity to afford big houses on large lots [which is typical in Utah]. The demand for that kind of housing is going to decrease, and the demand for more affordable housing goes up." Since 1990, Utah has seen its minority population increase from 9 percent to almost 20 percent last year. While still far below the U.S. minority population rate of 36 percent, that growth is impacting such economic sectors as housing. New data indicates that the overall mid-year apartment vacancy rate in Salt Lake County was 5.2 percent, a slight decrease from a year ago when the rate was at 5.7 percent. The drop resulted from a rising demand for apartments due to the growing number of households unable to qualify for homeownership. Kip Paul, director of investment sales for Commerce Real Estate Solutions, said trends indicate that the local rental housing market is on pace to see vacancies fall under the 5 percent mark sometime next year.
Down Payment Still Biggest Obstacle to Buying a Home
Digested From "Down Payment Still Biggest Obstacle to Buying a Home"
LoanRateUpdate.com (10/11/11) by Shirley Allen
Coming up with the down payment remains the biggest hurdle to buying a home, finds the biannual American Dream survey by Trulia. Just over half of renters cited saving for a down payment, 36 percent said qualifying for a mortgage, 34 percent said having a poor credit history, 31 percent cited the inability to pay off existing debt, 29 percent said not having a stable job, and 13 percent indicated declining home values. Fully 70 percent of poll-takers view homeownership as part of the American Dream, however, and 57 percent of current homeowners said that owning a home was one of the best long-term investments they could make.
Legislative/Legal News
Salt Lake City Now Requires All Apartment Owners to Get Business License
Digested From "Salt Lake City Now Requires All Landlords to Get Business License"
Deseret News (UT) (10/16/11) by Jared Page; Sandra Yi
In Salt Lake City, all apartment owners are now required to get yearly business licenses to operate within the city's limits -- even those with just one or two units. Anyone renting out a home, apartment, condominium, or even a basement must pay a $110-per-year fee to become licensed. On top of that, owners can be assessed a fee of $342 per unit unless they participate in the city's so-called "good landlord" program, which rewards good management practices with discounted fees. Those who complete the training will pay only $20 per unit. Salt Lake is one of several cities along Utah's Wasatch Front that have implemented such programs in recent years.
Apartment Tax Breaks to End in Oregon
Digested From "Apartment Tax Breaks to End"
Eugene Register-Guard (OR) (10/16/11) by Edward Russo
In Oregon, Eugene will no longer give property tax breaks to apartment developers in the neighborhood west of the University of Oregon. The City Council this past week ended seven years of awarding tax breaks for apartment communities in that area, which has been transformed by a student housing boom. The tax incentives awarded for qualified projects in the west university area is scheduled to expire on New Year's Day unless the City Council renews it between now and then. City Councilor Chris Pryor states, "There is not enough votes to renew it, so my guess is that it's pretty much dead." Primed by the University of Oregon's robust enrollment growth and relatively few university-provided on-campus dormitories, new apartment communities have sprouted during the last several years in the neighborhoods west and south of campus. Under the breaks -- dubbed Multiple Unit Property Tax Exemption -- developers get a decade of tax waivers on the value of new apartments and condominiums in designated areas.
Mortgage Default Notices Spike in Q3, RealtyTrac Reports
Digested From "Mortgage Default Notices Spike in Q3: RealtyTrac"
Reuters (10/13/11) by Leah Schnurr
New RealtyTrac data show that bank seizures of U.S. homes decreased in this year's third quarter, but a recent rise in default notices suggests that foreclosures could begin to escalate again. Default notices were filed on 195,878 properties from July through September, up 14 percent from the previous three months. Foreclosures fell 4 percent in the third quarter to 196,530 homes and were down 32 percent from the same period a year earlier.
Recycling Grants to Benefit Columbia (Mo.) Apartments
Digested From "Recycling Grants to Benefit Apartments, Business"
Maneater (10/14/11) by Lizzie Johnson
Two grants, provided by the Mid-Missouri Solid Waste Management District, will help the city's efforts to increase recycling in Columbia-based apartment communities and office buildngs. The two $5,000 grants will give three local apartment communities and eight city office buildings recycling bins and is expected to collect 24.5 tons of additional waste every year. The other grant will be used to buy a new recycling bin for the Apartment Recycling program, which was launched in 2000. Prior to the program, Columbia's 33 apartment communities did not offer free recycling.
Fannie Mae Sees Enough Post-2012 Taxpayer Support
Digested From "Fannie Mae Sees Enough Post-2012 Taxpayer Support"
Reuters (10/12/11) by Margaret Chadbourn
Fannie Mae CEO Michael Williams says the government-sponsored enterprise will have access to enough public funds to continue operations even after its unlimited taxpayer lifeline expires at the end of 2012. Since being seized by Washington three years ago, Fannie Mae has drawn more than $104 billion in U.S. taxpayer aid, while paying back $14.7 billion in the form of dividends. Both Fannie Mae and Freddie Mac have been able to continue channeling funds to the mortgage market as a result of the Treasury's support.
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